CoinShares: high inflation slows Bitcoin on its way to $80.000

The latest US inflation figures offer Bitcoin little support, according to CoinShares in a new analysis. Core inflation came in slightly higher than expected, making a rate hike in September more likely and increasing the chance that the Federal Reserve maintains a tighter policy for longer. At the same time, $243 million already flowed out of digital ETP products this week, following inflows of around $1.3 billion the week before.

Bitcoin is available at OKX and Bybit.

In brief:

• Higher core inflation increases the chance of a rate hike in September and limits the room for Bitcoin’s price to rise
• ETP products see an outflow of $243 million this week after a week with $1.3 billion in inflows
• CoinShares sees possible longer-term support for Bitcoin if the US Treasury takes more drastic action in the bond market

September rate hike becomes more likely

According to James Butterfill, head of research at CoinShares, headline inflation was largely in line with expectations, but core inflation came in slightly above forecasts. That gives the Fed less reason to ease monetary policy and actually increases the chance of another rate hike next month.

For Bitcoin, that is unfavourable news. The market had counted on weaker inflation figures as a potential trigger for a sustained break above $80.000. Now that this stimulus is absent, CoinShares expects the price to remain range-bound in the short term. A rise above that level probably requires weaker economic data, a clearer change of course by the Fed or another external impulse, according to Butterfill. We previously wrote about how rising bond yields put Bitcoin under pressure.

Bond market as a wildcard for Bitcoin

At the same time, CoinShares points to a development that could actually benefit Bitcoin in the medium term. The US Treasury has expanded its bond buyback programme, but is failing to noticeably push down long-term yields. The yield on long-dated debt remains high, despite the extra purchases at the long end of the yield curve.

According to CoinShares, that failure increases pressure on Treasury Secretary Scott Bessent to come up with much more extensive intervention, a so-called “bazooka” approach that should push yields down more forcefully. Rising oil prices do not make his position any easier.

Should such large-scale intervention take place, it could strengthen the narrative around currency debasement that has already supported Bitcoin and gold in recent weeks. CoinShares states that a sizeable intervention without a corresponding fiscal improvement could stir up concerns about fiscal dominance and the purchasing power of the dollar in the long term. In that scenario, Bitcoin could be one of the strongest beneficiaries. The recent outflow from Bitcoin ETFs shows that investors are still responding cautiously to this kind of macro uncertainty for now.